Seven Tips for Combating Rising Postal Rates

On Feb. 26 the Postal Regulatory Commission recommended a 7.6 percent overall postage rate increase. This unanimous decision will result in a 2-cent price increase for first-class stamps to 41 cents, rather than the 3-cent increase that the U.S. Postal Service (USPS) requested. While this represents a 5.1 percent increase in the single-piece rate, the increase in the discount rate adjustment for business mailers was much steeper, as much as 10.4 percent. The commission agreed with the American Postal Workers Union’s recommendation to limit discounts that large mailers receive for presorting mail. Coupled with the already stringent rules for earning the best postal discounts, this limitation can have real impacts on high-volume mailers’ bottom lines.

Any company that prints and mails high-volume transactional documents must carefully consider its billing methodologies, understand the USPS technologies that bolster mail efficiencies, and enhance the marketing value of monthly customer statements to offset these costs. Taking the time and making the investments to improve certain processes can save enough to offset the cost of the coming postage hike. Here are seven fundamental tips to consider that will help minimize print, mail and postage costs, no matter the rates.

1) Stay below 3.5 ounces
One sure way to start saving is to find ways to keep mail pieces under 1 ounce. Many telecom providers continue to rely on legacy systems that use preprinted forms and continuous line-feed printers. Statement pages are printed one-sided, resulting in many multi-page bills. Simple duplex printing—printing on both sides of the page—can allow companies to trim the weight of each mail piece and thus greatly reduce postage costs.

Any operator should also look to take advantage of state-of-the-art document composition tools that their print suppliers should already have. These tools should allow for simple things like moving secondary pages that list detail from portrait to landscape, eliminating unnecessary white space or porting billing detail to the Web. These uncomplicated measures will help keep all mail pieces at less than 1 ounce.

The new rules happen to propose lower costs for each additional ounce per piece of mail, but that cheaper second ounce should only be used to a provider’s advantage. Combine communications that go to each household in a single envelope, and add inserts that hold marketing messages. Mailing a company newsletter separately will cost significantly more than the additional ounce it would add to a statement envelope. Remember, though, that if the 3.5-ounce threshold for letter mail is exceeded, the pieces are classified as “flats” and incur an increased cost.

2) Leverage postal discounts through presort savings
The USPS grants significant discounts for properly preparing and presorting mail. For example, it is best to segment mail in order to achieve the threshold volume in each ZIP code that qualifies an entire mailing for the highest discount rate. Telecom providers typically have both a high volume and high concentration of mail, and can achieve significant savings with presort savvy. Using proper mail preparation and presorting not only earns the best discounts, it also speeds delivery times and ideally remittance as well.

3) Concentrate on address data quality
Address data quality quickly develops into an expensive problem for all organizations that overlook it. Conventional wisdom suggests that nearly one-fourth of all mail that goes through the USPS contains some address mistakes. Simple errors—like misspelled street names and improper abbreviations—can result in significant increases in postage costs. Coding Accuracy Support System (CASS) software is available to validate, correct and standardize addresses. If CASS doesn’t recognize a mail piece, it won’t qualify for presort discounts and will instead be mailed at the full rate of 41 cents rather than the approximate automated discount rate of 33 cents.

4) Minimize returned mail
If a mail piece cannot be delivered and is designated “undeliverable as addressed,” or UAA, the additional cost to correct the piece is usually as much as 70 cents more than to mail it right the first time. A number of tools in the marketplace are designed to reduce returned mail by automating the address updating process. These tools identify undeliverable addresses and link old addresses to new move addresses.

To date, CASS-certification is all that’s been required for mailers to qualify for maximum automation rate postal discounts, but delivery point validation (DPV) is the new game in town. Though DPV was available with some software applications, it was only offered as an option. Beginning Aug. 1, with what the USPS calls “Cycle L” of certified software, mailing lists must be run through DPV processing in order to continue to qualify for the deepest discounts.

5) Make your mail ‘machine-friendly’
It pays to use automation. The USPS likes automated mail because it is much easier to process. To qualify for the best rates, mailers must make sure to print a delivery point barcode on each mail piece and commingle the mail for concentrated volume.

Today the USPS imposes a 13-cent surcharge for letters and packages that it deems difficult to process. The new rate proposal will replace the old surcharge with an even stiffer one. Any “odd-shaped” mail—mail weighing more than 3.5 ounces, measuring more than 4.25 inches high or 6 inches long, or polybagged, with strings, buttons or other such devices—will be considered the same as flat mail and subject to an even larger surcharge.

What’s more, the cost for flat mail versus folded is increasing. Flat mail will cost up to 32 percent more per piece than folded mail. This “shape-based pricing” has to do with the cost of handling mail that can’t be automated. Converting flat mail to folded will produce savings for mailings that are one to 22 pages and under the 3.5 ounce requirement. This will reduce postage costs immediately and should be an easy fix.

6) Explore electronic delivery
Some point to electronic bill presentment as a way to sidestep the pending postal rate increases, but recent reports from the USPS show that more than 70 percent of people still prefer to receive their statements in the mail. Converting just 10 to 20 percent of existing customers to electronic bill receipt would result in massive savings, so it makes sense to provide customers with incentives to change their paperbound habits. A combined paper and electronic statement may be one way to help customers through the transition. Paper invoices would no longer hold all specific details, but would instead point customers to secure Web sites to access call details and other services. This would make the bill shorter, and thus more economical to print and mail, yet still provide customers with essential information.

7) Maximize marketing opportunities
Every company can find hidden value in its paper statements by using them as marketing vehicles. Monthly bills are often the only direct point of contact with customers, and telecoms should view these documents as a source of value rather than “the cost of doing business.” With selective data mining and thoughtful document composition, it is possible to produce statements and bills that command dramatically improved customer response. Leveraging today’s document composition tools to realize the full promise of personalization and one-to-one marketing reaps bottom-line benefits.

Postal Rates Will Continue to Rise
The latest proposed postal rate increase will not be the last. Postage rates have been rising gradually for several years, and the trend shows no sign of slowing. Postmaster General John Potter has said that “the Postal Service is not immune to the cost pressures affecting every household and business in America.” Another rate case can and probably will be filed by Dec. 20, and the 1 cent saved in the most recent decision likely will be picked up and added back in the fall of 2008.Though rate increases are never good news, the silver lining for a telecom provider is that it can use a rate hike to focus on print and mail production efficiency that will more than just offset the increase.

Harry Stephens is president and CEO of DATAMATX (www.datamatx.com), one of the nation’s largest privately held, full-service providers of printed and electronic billing solutions. An advocate for business mailers across the country, Stephens serves on the executive board of the Greater Atlanta Postal Customer Council, the Major Mailers Association (MMA), the PCC Advisory Committee (PCCAC), the National Postal Policy Council (NPPC) and the Imaging Network Group (INg), an association for electronic service bureaus.